The inheritance tax basic exclusion and tax-saving measures: understanding the ¥30 million + ¥6 million × statutory heirs rule
Even households that think "inheritance tax has nothing to do with us" are increasingly becoming taxable if they own real estate. The 2015 reform sharply lowered the basic exclusion, and in urban areas such as Tokyo and Osaka it is no longer unusual for even an ordinary detached house to attract inheritance tax.
The inheritance tax basic exclusion
| Number of statutory heirs | Basic exclusion | Notes |
|---|---|---|
| 1 person (e.g., spouse only) | ¥36 million | - |
| 2 people | ¥42 million | e.g., spouse + 1 child |
| 3 people | ¥48 million | e.g., spouse + 2 children |
| 4 people | ¥54 million | e.g., spouse + 3 children |
Before the reform: ¥50 million + ¥10 million × number of heirs. After the reform, the number of households that became taxable roughly doubled. If the inheritance includes real estate, an early estimate is essential.
Inheritance tax rates (amount acquired according to the statutory share)
| Amount acquired | Rate | Deduction |
|---|---|---|
| ¥10 million or less | 10% | − |
| ¥30 million or less | 15% | ¥500,000 |
| ¥50 million or less | 20% | ¥2 million |
| ¥100 million or less | 30% | ¥7 million |
| ¥200 million or less | 40% | ¥17 million |
| ¥300 million or less | 45% | ¥27 million |
| ¥600 million or less | 50% | ¥42 million |
| Over ¥600 million | 55% | ¥72 million |
* This rate applies to "each person's amount acquired, obtained by apportioning the taxable inheritance total by the statutory share" (not the actual share received)[National Tax Agency No.4155].
The flow of the calculation (example: ¥100 million estate, spouse + 2 children)
Inheritance tax is calculated in the order "① work out the taxable inheritance total → ② apportion by the statutory share and apply the rate to get the total inheritance tax → ③ apportion by the actual share received and subtract the spousal reduction, etc."[National Tax Agency No.4152].
① Basic exclusion: ¥30M + ¥6M × 3 people = ¥48 million → taxable inheritance total ¥100M − ¥48M = ¥52 million
② Apportion by statutory share: spouse 1/2 = ¥26M (rate 15% − ¥500,000 = ¥3.4M) / the 2 children take 1/4 each = ¥13M (rate 15% − ¥500,000 = ¥1.45M each) → total inheritance tax = ¥3.4M + ¥1.45M + ¥1.45M = ¥6.3 million
③ The spouse acquires the statutory share (1/2) → that portion is exempt under the spousal tax reduction[National Tax Agency No.4158] → the actual tax payable is only the children's share = about ¥3.15 million in total
* In practice it often drops further thanks to the special provision for small-scale residential land and the life-insurance exemption, and how much you concentrate on the spouse changes the total including the second inheritance (discussed later). You can also make a rough estimate with our detailed calculation tool.
Main tax-saving measures you can take during your lifetime
Annual gifting (¥1.1 million a year)
You can transfer up to ¥1.1 million a year free of tax. This is the most basic way to gradually reduce your inheritance estate during your lifetime. Because the add-back period was extended to 7 years from 2024, it is important to start early. For details, see the gift tax exemption.
Using life insurance
Death benefits received by heirs have an exemption of "¥5 million × number of statutory heirs"[National Tax Agency No.4114]. With 3 heirs, up to ¥15 million is exempt. Converting cash into insurance compresses the inheritance estate.
Special provision for small-scale residential land
The land where the deceased lived is reduced by up to 80% (up to 330 m² of area)[National Tax Agency No.4124]. Land valued at ¥50 million is valued at ¥10 million, a substantial tax saving.
Spousal deduction
Property inherited by the spouse is exempt up to whichever is larger of "¥160 million" or "the spouse's statutory share." However, you need to plan while also considering the tax burden of the second inheritance.
Gifts within 7 years before the start of inheritance are added to the inheritance estate (a total of ¥1 million is deducted for the extended 4-year portion)[National Tax Agency No.4161]. It is important to gift as early and over as long a period as possible.
Deadline and method for filing and payment
Even when the tax amount becomes zero by using the special provision for small-scale residential land, the spousal deduction, and so on, filing is required in order to apply those provisions. If you miss the deadline, you can no longer use the provisions.
The payment method is, in principle, a lump-sum cash payment. If funds are short, deferred payment (installments) within 10 years, or payment in kind with real estate and the like, are also permitted.
Summary
Think through to the second inheritance
If in the first inheritance (the initial inheritance) you use the spousal deduction (exempt up to ¥160 million) to the maximum, that property is taxed all at once in the second inheritance when the spouse passes away. In the second inheritance the spousal deduction cannot be used and there are fewer statutory heirs, so the household's total tax burden may actually increase. The key to tax saving is to consider the allocation across both the first and second inheritances together.
FAQ
Will my household owe inheritance tax?
If the total estate exceeds the basic exclusion (¥30 million + ¥6 million × number of statutory heirs), it is taxable. Real estate such as your home is valued using roadside land prices and the like. If it is borderline whether you exceed it, estimate early.
If the tax is zero thanks to a special provision, is filing unnecessary?
No. Even when the tax becomes zero through the spousal tax reduction or the special provision for small-scale residential land, an inheritance tax return is required to receive the benefit. Without filing, you cannot use the provisions.
When is the filing deadline?
Within 10 months from the day after you learn of the start of inheritance (the death of the decedent). Payment is on the same deadline, and, in principle, a lump-sum cash payment.
Is lifetime gifting effective for inheritance tax?
Yes. However, under annual (calendar-year) taxation, the 7 years before inheritance (phased in under transitional measures) are subject to add-back. The earlier and longer you gift, the more advantageous it is, and using the ¥1.1 million annual basic exclusion of the settlement-at-inheritance taxation system is also an option.
Reference links (sources)
This article is based on the following published materials from the National Tax Agency (neutral, primary sources). Valuations and provisions are amended, so please check the latest content before filing.
- National Tax Agency No.4152 Calculation of inheritance tax (in Japanese)
- National Tax Agency No.4158 Spousal tax reduction (in Japanese)
- National Tax Agency No.4124 Special provision for small-scale residential land (in Japanese)
- National Tax Agency No.4114 Death benefits subject to inheritance tax (the life-insurance exemption) (in Japanese)
- National Tax Agency No.4161 Addition of gifted property and tax credit (calendar-year taxation) (in Japanese)
* This article provides general information and is not tax advice. For property valuation and filing, please consult a tax office or a tax accountant well-versed in inheritance.